The following is general information in connection with an application by a company to carry out Type 9 (asset management) regulated activity in Hong Kong. This information however is for general reference only.
Applying SFC no. 9 License for Asset Management in Hong Kong
The following is general information in connection with an application by a company to carry out Type 9 (asset management) regulated activity in Hong Kong. This information however is for general reference only.
The Licensing Process
The licensing application process would commence following the submission of a letter application together with completed prescribed forms and supporting documents as well as a prescribed fee. The Securities and Futures Commission (“SFC”) would examine, inter alia, the business plan, compliance functions, financial status as well as other aspects of the licensed corporation and its proposed regulated activity, and it would need to be satisfied that the substantial shareholders and responsible officers of the licensed corporation (which must be incorporated in Hong Kong) are fit and proper persons. The SFC would send a letter to the applicant formally accepting the application following a preliminary review of materials received; quite often however, it may require submission of additional information and/or clarification of certain key issues identified prior to formally accepting the application. The SFC performance pledge for processing a licensing application for corporations is 15 weeks from formal acceptance. Depending on the completeness of the information provided and whether the SFC has particular concerns regarding the application, the licensing process would take approximately 4-6 months, but it may be longer depending on a number of factors such as the complexity of the issues which may be raised and the number of applications the SFC is processing at any particular time.
For setting up the corporation from scratch, some major preparation items are listed below:
- Establishment of a Hong Kong private limited liability company (“HK Co”)
- Opening of a bank account
- Sourcing suitable responsible officers (at least 2 are required for each regulated activity) and assessing their fitness and properness to supervise the proposed activities
- Preparation of a compliance manual, a business plan, a financial projection plan and other policies and documents
- Securing premises for the HK Co
- Compiling all relevant materials for the licensing application (including forms and supplements regarding proposed responsible officers and substantial shareholders)
- Submitting the licensing application to the SFC (including the application for approval of the proposed responsible officers)
Requirement to establish a Hong Kong company
For a corporation to be licensed to carry out regulated activities in Hong Kong, section 116 (2) of the Securities and Futures Ordinance (Cap. 571 of the Laws of Hong Kong) (“SFO”) requires that it has to be either a company incorporated in Hong Kong or an overseas company registered under Part 16 of the Companies Ordinance (Cap. 622 of the Laws of Hong Kong) (“CO“) having a principal place of business in Hong Kong (i.e. branch company). While it may be possible to set up an overseas incorporated parent and subsequently register a branch in Hong Kong, the SFC prefers the use of Hong Kong incorporated companies and has expressed a strong preference against the use of a branch. This is because, inter alia:
- The SFC feels more comfortable from an enforcement perspective with the use of a Hong Kong incorporated entity;
- From the perspective of record keeping, it is impracticable for the records of an overseas parent company to be kept in Hong Kong;
- From a financial reporting perspective, there are higher compliance costs associated with periodic reporting of consolidated financial statements that satisfy Hong Kong requirements;
- The SFC has a preference for statutorily required capital of the licensed corporation to be kept in Hong Kong;
- There is almost no precedence in Hong Kong for the use of a branch as a licensed corporation; and
- From a corporate risk perspective, it may be beneficial to use a subsidiary rather than a branch as a subsidiary is a separate legal entity from the parent – i.e. the subsidiary will be completely separate from its parent so that the parent will not be liable for the debts of the subsidiary.